Different Types of Corporate Restructuring Activities

·         Merger - Any transaction that forms one business enterprise by two or more formerly independent business entities. One company legally absorbs all assets and liabil­ities of the other. Generally negotiated and are friendly

·         Consolidation – Special form of Merger. Combines two business entities and creates a new one

·         Acquisition – Purchase of a controlling interest in a firm and involves transfer of ownership

·         Tender Offer - One firm or person makes an offer directly to the shareholders of the target to buy their shares at specific price. Can be hostile if this offer is made without the approval of board of directors of the target

·         Restructuring - Changes in orga­nization, operations, policies, and strategies to enable the firm to achieve its long term objectives

·         Spin off – Some parent company’s shareholders give up their shares and receive shares in the subsidiary of that value

·         Split up - Division of a company into two or more separate companies. Involves the entire company rather than a subsidiary

·         Equity Carve Out – Parent firm offers some of the subsidiary’s common stock to general public and infuse cash into the parent without losing control

·         Divestiture – Sale of a segment of a company (Asset or Product Line or a Subsidiary) to another party for cash and or securities

·         Industry roll ups - Consolidator acquires a large number of small companies with similar operations. Profit maximization or revenue maximization is achieved by economies of scale in purchasing, marketing, information systems, distribution, and senior management

·         Takeovers or buyouts - Change in controlling ownership of a corporation

·         Leveraged Buyouts - A small group of inves­tors purchases a target company by financing the acquisition largely by borrowed funds

·         Leveraged Recapitalization - Defen­sive reorganization of the company’s capital structure. Outside shareholders (non­-management) receive a large, one-time cash dividend and inside shareholders receive new shares of stock.

·         Greenfield Investment - Investment in a new project involving the con­struction of a new building, purchasing of new machinery and equipment, hiring of managers, administrative staff, and production workers. Investors create a new business entity.

·         Cross-border M&A - FDI through which an existing business in part or in its entirety is acquired in a host country

·         Foreign direct investment (FDI) - Investment in a for­eign country and can assume greenfield or cross-border M&A form